Columnist image
Pattie Lovett-Reid

Chief Financial Commentator, CTV


As the markets and the housing market, which is ridiculously hot at least in Toronto, continue to march higher, you can't help but be reminded of Warren Buffett's famous quote, “Be fearful when others are greedy and greedy when others are fearful.”

Year-over-year, investor confidence is up on nearly all investment vehicles stocks, funds, TFSAs, RSPs, and ETFs, according the latest Manulife Investor Sentiment Index. Canadians’ confidence level in stocks rose 13 per cent, balanced mutual funds up 26 per cent and investing in their own homes increased 45 per cent. There was a 17-per-cent decline in confidence in investment properties, 15 per cent in cash, and 9 per cent in fixed income.  

Interesting to note but not surprising, Canadians continue to be optimistic about their financial future but continue to take a conservative and responsible stance on their saving and investing.

When it comes to housing, there are conflicting views across the country:

  • 29 per cent believe it is a bad time to buy a home - up 6 per cent from just six months ago.
  • 68 per cent say there is a lack of affordable options, 31 per cent point to market volatility as the top reasons for negative sentiment on housing

B.C. respondents were most likely to say it is a bad time to buy a house while 38 per cent of  Albertans perceive now to be a good time to buy. In Ontario, 32 per cent think it is a bad time to buy and in Quebec 34 per cent say it is good time to buy. None of this should surprise us, as Canadians have been voicing concerns, citing a lack of affordable housing options in some markets or simply volatility in others.

Something to keep in mind is that the U.S looks to be on the cusp of raising rates again in March. Right now there is over a 90 per cent probability this will happen on the 15th. Higher rates in the U.S. bond market will lead to higher rates in the bond market here in Canada, and that could lead to higher mortgage rates.

Higher interest rates are the wild card in the housing market and could be the catalyst that takes some of the air out of the market and not just in Toronto. It wouldn't take all that much of a movement higher to gravely impact those living close to the margin.

According to Manulife, the majority of us (77 per cent) are preparing ourselves for higher rates this year, with those over 65 even more convinced (84 per cent) it will happen. That's the good news. The bad news is 37 per cent think mortgage rates should be lower on both fixed and variable, particularly in Atlantic Canada and Quebec. It is unrealistic to think rates will go lower or even stay the same, as the U.S. economy gains traction and prepares for further rate increases.

Meanwhile, as renters wait for things to cool off , 88 per cent still say owning a home is important to them, with 82 per cent saying it is their primary financial goal. I would like to think Buffett's words of advice are being heard. Canadians are not necessarily willing to buy at any cost – 77 per cent of Canadians who are renting plan to continue to do so. That's 7 per cent more than six months ago. This cautionary stance isn't only being demonstrated in the housing market, balanced mutual funds when it comes to investing climbed 10 per cent in one year, the highest level since 2011.

My takeaways from the Manulife survey suggest Canadians get it. We have to balance growth with market uncertainty, recognize mortgage rates are likely headed higher and look for way to decrease your mortgage.  The ultimate goal— year-over-year net worth improvement.